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january 1937
Germany’s Colonial Demands
Hjalmar Schacht
Volume 15 Number 2•
1937
FOREIGN AFFAIRS
Vol. 15 JANUARY 1937 No. 2
GERMANY'S COLONIAL DEMANDS
By Hjalmar Schacht
THE American reader will think that the problem of colonial
possessions for Germany is no concern of his. For that rea son I should like to refer to two points which are of im
portance from an American standpoint in the solution of this
problem. First of all, I do not believe that the world economy can
enjoy lasting prosperity without Germany's participation. If
Germany were isolated, one might say that the world could sur vive the loss of a market of some seventy million people, that
seventy million consumers, more or less, make very little differ ence to the world at large. But no such isolation of Germany is
possible because the whole of Eastern Europe simply cannot
dispense with the German market. The Eastern European countries
are predominantly agrarian.
For them the German market is a matter of life and death. At the present time Germany receives
some 14 percent of the ex
ports of Poland, 16 percent of those of Czechoslovakia, 17 per cent of those of Austria, 30 percent of those of Hungary, 49 percent of those of Bulgaria, 20 percent of those of Rumania, 36 percent of those of Jugoslavia, 45 percent of those of Greece and 64 percent of those of Turkey. Consequently, the disappear ance of Germany from the world market would have most
un
welcome results for the whole of Eastern Europe. Nor is it of much less importance
to the Scandinavian countries. No one
must forget this importance of Germany, situated as she is in the heart of Europe, with her highly developed population and her
high standard of living. European prosperity cannot be conceived of without German prosperity. And however much America may wish to stand aloof, there is not the slightest doubt that the ebb and flow of European prosperity is important to her.
The second reason why the United States cannot remain in
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224 FOREIGN AFFAIRS
different to the German colonial problem is moral. Even though the United States finally refused to ratify the Versailles Peace
Treaty, it nevertheless was President Wilson who, by the proc lamation of his Fourteen Points, provided the occasion for peace negotiations. Point Five of the Wilson program concerning col onies was one of the points on which Germany relied when she entered into those negotiations. And this, moreover, after the
American Government had received from the Allied Powers the
assurance, and had conveyed that assurance to
Germany, that
the Fourteen Points would constitute the basis of peace. Point Five of the Wilson program reads as follows:
A free, open-minded and absolutely impartial adjustment of all colonial
claims, based upon a strict observance of the principle that in determining all such questions of sovereignty the interest of the populations concerned
must have equal weight with the equitable claims of the Government whose title is to be determined.
Germany was perfectly ready to submit her colonial claims to the test provided for in Point Five, the more so because Colonel
House, the President's friend and collaborator, in his well-known
Lyons wireless in October 1918, had given the following interpre tation of President Wilson's conception: "The stipulation is that in the case of the German colonies the title is to be determined after the conclusion of the war by 'impartial adjustment' based on certain principles. These are of two kinds: 1. 'Equitable' claims. 2. The interests of the populations concerned." Colonel
House then referred specifically to Germany, and said: "What are the 'equitable' claims put forth by Germany? That she needs access to
tropical raw materials, that she needs a field for the ex
pansion of her population, that under the principles of peace proposed, conquest gives her enemies no title to her colonies."
?
* Editor's Note. Although American authorities have recognized the moral obligations imposed
by the Fourteen Points, many of them will learn here for the first time that the interpretation of
the Fourteen Points sent to President Wilson from Paris by Colonel House in a cable dated
October 29,1918, had in some manner become known to the German Government at that time, i.e. two weeks before the Armistice. The implication of Dr. Schacht's statement might be that
Colonel House's message (the reference to it as a wireless from Lyons is obscure) was intercepted
by the German authorities. The message in question transmitted a memorandum prepared for
Colonel House, largely by Walter Lippmann. The sentences quoted above by Dr. Schacht appear in that memorandum. The full text is printed by Charles Seymour in Volume IV (p. 192-200) of
"The Intimate Papers of Colonel House," published in 1928. It also is given by David Hunter
Miller in "My Diary at the Conference of Paris," Volume II, pages 69-80, privately printed in
New York in 1924. r The full text of the section of the memorandum dealing with Article V reads as follows:
f "Some fear is expressed in France and England that this involves the reopening of all colonial
questions. Obviously it is not so intended. It applies clearly to those colonial claims which have
GERMANY'S COLONIAL DEMANDS 225
Just as it is impossible for the Government of Great Britain to ignore, in the face of history, the solemn assurance it gave at the beginning of the World War that it did not wish to annex the German colonies, so it is equally impossible for the American
people to ignore the solemn declarations made by their Chief Executive and his collaborator.
It was not the German Government that brought the war into the colonial territories. It was not the German Government that brought the colored peoples into the World War, an act the
consequences of which we now see in the widespread unrest pre vailing amongst the colored races. The Congo Act of 1885, in which England, France, Belgium and Germany participated, provided that the signatory Powers in
case of war would re nounce the use of the Congo Basin as a basis for war-like opera tions. On August 23, 1914, Germany suggested to her opponents that the colonies should be left out of the war. France and Eng land did not follow this suggestion. They not only violated the
Congo Act, but brought the war into the German colonies.
Germany's entire colonial military power was only some 7,000 men in all the colonies put together. They had no significance
been created by the war. That means the German colonies and any other colonies which may come
under international consideration as a result of the war.
"The stipulation is that in the case of the German colonies the title is to be determined after the conclusion of the war by 'impartial adjustment' based on certain principles. These are of two
kinds: i. 'Equitable* claims: i. The interests of the populations concerned. "What are the 'equitable* claims put forth by Britain and Japan, the two chief heirs of the
German colonial empire, that the colonies cannot be returned to Germany? Because she will use
them as submarine bases, because she will arm the blacks, because she uses the colonies as bases of intrigue, because she oppresses the natives. What are the 'equitable* claims put forth by Ger
many? That she needs access to tropical raw materials, that she needs a field for the expansion of her population, that under the principles of peace proposed, conquest gives her enemies no title to her colonies.
"What are the 'interests of the populations'? That they should not be militarized, that exploi tation should be conducted on the principle of the open door, and under the strictest regulation as
to labor conditions, profits and taxes, that a sanitary r?gime be maintained, that permanent
improvements in the way of roads, etc., be made, that native organization and custom be re
spected, that the protecting authority be stable and experienced enough to thwart intrigue and
corruption, that the protecting power have adequate resources in money and competent adminis trators to act successfully,
"It would seem as if the principle involved in this proposition is that a colonial power acts not as owner of its colonies, but as trustee for the natives and for the interests of the society of na
tions, that the terms on which the colonial administration is conducted are a matter of interna tional concern and may legitimately be the subject of international inquiry and that the peace conference may, therefore, write a code of colonial conduct binding upon all colonial powers."
Professor Seymour states ("Intimate Papers," v. V, p. 153) that in reply to the House cable of October 29, President Wilson the next day cabled from Washington that the comment on the
Fourteen Points was "a satisfactory interpretation of the principles involved," but that the de tails of the application mentioned should be regarded as merely illustrative suggestions.
22? FOREIGN AFFAIRS
other than to act as a police force for the maintenance of law and order. The inhabitants of the colonies were never used for Ger
man military purposes, whereas France brought over half a million colored soldiers and put them into the field against Germany. I make these preliminary remarks in order to show
clearly that for Germany the colonial question is not today, any more than it was before, a question of Imperialism or Militarism. To this day it is still essentially a question of her economic exist ence.
In the golden age before the World War the problem of colonies and raw materials did not have the importance it has today. This is as true for Germany
as for other countries. Before the war,
Germany's world investments were in round figures 12,000 mil
lion dollars, the profits of which could be used to buy raw mate rials all over the world. The markets where raw materials were
procured were completely free. Very seldom were the develop ment and distribution of raw materials controlled by cartels, and on the rare occasions when raw materials were cornered the
situation was only temporary. Long-term commercial treaties
assured the freedom of international trade. All the important countries were on the gold standard, and this provided a sure basis for commercial calculations. Emigration and immigration, between the young countries and the old, was open and was
looked on with favor. All these elementary principles of international trade and inter
course have now disappeared. Strict regulations govern immigra tion into almost all the countries where formerly immigrants were
welcome. The gold standard has been abandoned by nearly every country. Commercial treaties are concluded only for brief periods, and in their place have
come quotas and restrictions, to say
nothing of constant increases in more effective tariffs. German in
vestments abroad have been taken away without compensation, and the markets where raw materials are to be procured
are
largely subject to the same restrictions that prevail in other fields of commerce. In recent years we have seen the results of this
policy. World trade has fallen to almost one-third of its previous maximum. Credit machinery has ceased to function. Confidence
in international payments has been extinguished. Every merchant and investor is chary of investments in foreign countries.
In view of the decline in international commercial relations, the more important countries have fallen into the habit of ex
GERMANY'S COLONIAL DEMANDS 227
ploiting more intensively the economic territories at their dis
posal. Much is said nowadays to the effect that Germany is
striving'for autarchy. People entirely forget that this autarchy has long since been achieved by such countries as France and Great Britain, not to mention Russia and the United States.
Autarchy can be easily achieved ? in fact it naturally exists
?
in an economic region which is supplied with almost all raw
materials, provided it enjoys the same monetary system through out. The British devaluation would never have had the success which it achieved if Great Britain had not been able to bring the monetary system of the Dominions onto the same basis as
her own. France could never have used her colonial empire so
successfully if it had not been administered under the same
monetary system as the mother country.
I should like to quote some figures to indicate the extent to which autarchy has progressed in the British and French Em
pires. The share of the British Dominions, colonies and protec torates in the imports of Great Britain rose during the last twelve years from about 31 to about 42 percent; and their share in British exports rose from about 41 to about 49 percent. The
imports of France from her colonies increased in the last ten
years from about 10 to about 26 percent, and her exports to the colonies increased from about 14 to about 32 percent. So vast is the geographical expanse of the United States of America, so enormous its wealth, that it is much less dependent than other countries on an exchange of goods with the outside world. In its natural wealth lies the explanation of the fact that its 125,
000,000 people have only a ten percent share of the world's
trade, whereas the 45,000,000 people of Great Britain have more
than 14 percent. Of course the circumstances are even more
favorable in Russia, which is not so developed and contains almost all kinds of raw materials.
As against these great national economic domains stand the
countries with large populations but limited territories. Because of their inadequate land resources they are much more dependent than the others upon the international exchange of goods. These two kinds of countries have lately been classified as the "Haves" and the "Have-nots."
To their astonishment, statesmen have now become conscious
of the fact that the British Empire has more than a quarter of the earth's surface at its disposal, and that one-quarter of the world's
228 FOREIGN AFFAIRS
wheat, one-half of the world's wool and rubber, one-quarter of
the world's coal, one-third of the world's copper and almost all the world's nickel is produced within the confines of that Empire. It was recently stated in the House of Lords that of an estimated
twenty-five different varieties of essential raw materials, the British Empire was amply supplied in its own territory with no less than eighteen,
was supplied
to a certain extent in two cases, and was deficient only in five.
Germany, on the contrary, as the same speaker in the House
of Lords pointed out, was sufficiently supplied by its own produc tion in only four cases, was more or less adequately supplied in
two, and was completely without supplies in nineteen. In Italy and Japan conditions are equally unfavorable. The speaker in the House of Lords appropriately added that, "in these circum stances it was not surprising that there was unrest in Germany, Japan and Italy; it was true that Great Britain was probably the most peace loving country in the world; that was because she had
got all that she wanted." What is particularly interesting in this statement is the connection established by the speaker between the control of raw materials and the love of peace. He very rightly recognizes that a nation which is cut off from the essential necessities of life must be a source of unrest in the world.
Now, however, events have unfortunately occurred to make
Germany's case very different from that of similarly situated countries like Japan and Italy. Despite the League of Nations and its alleged assurances of peace, Japan has meanwhile decided to help herself and has acquired Manchuria; while Italy, by the
conquest of Abyssinia, has expanded the territory which she re
quires for her life. As a result, Japan and Italy are no longer amongst the unsatisfied nations. They have left the Have-nots and have joined the ranks of the Haves, those nations which are satisfied. Germany remains the lone unsatisfied large Power. So
long, then, as the problem of colonial raw materials is not solved for Germany, so long will she remain a source of unrest despite all her love of peace. It is that love of peace which still permits her to entertain the hope that she can solve the colonial problem peacefully and that she can take her place in the ranks of the
Haves.
In the year 1929, when the extension of ample credit to Ger
many still concealed her economic situation, and while the in ternational gold standard still flourished, 4,400 million dollars
GERMANY'S COLONIAL DEMANDS
out of the 5,630 million dollars which Germany paid for imports went for food stuffs, raw materials and semi-manufactured goods. In the year 1935, the import total had declined to 1,680 million
dollars, of which 1,400 million dollars were devoted to food
stuffs, raw materials and semi-manufactured goods. The extent
to which German production has been throttled is obvious. Of the 1,400 million dollars spent for imports, 600 million were devoted to food stuffs alone, and only 800 million went for raw materials and semi-manufactured goods. Any such quantity of raw materials is far below what Germany normally needs to keep her industries going and maintain the standard of life of her
people. The false dawn which foreign credits brought to Ger
many in 1925-1930 following the institution of the Dawes Plan, made way for cruel reality when this credit inflation ceased and the world economic crisis occurred. It is either silly or cynical, in the face of such facts, for foreign commentators to declare that
Germany can buy raw materials in the world market at will.
No, Germany cannot do that because she does not possess the means of paying for them in foreign currencies; and she does not
possess the means because foreign countries do not consume
enough of her wares. In the circumstances, it can hardly be a matter of surprise that
Germany should try to increase her ability to produce raw mate rials in her own country by forced and artificial means. We know
very well that even if we succeed in replacing with artificial na tive products a number of raw materials normally supplied by the world market we can do this only at high cost. So we ought to reject autarchy on principle, because it will necessarily lead to a lowering of the standard of life of the German people. But we have no choice so long as political conditions do not permit German colonial activity. There will be no peace in Europe until this problem is solved. No great nation willingly allows its stand ard of life and culture to be lowered and no great nation accepts the risk that it will go hungry.
I should like to make perfectly clear that autarchy, whether natural or produced artificially, cannot possibly be an ideal. It is opposed to the general principles of civilization. Autarchy
means isolation from the rest of the world. A reduction in com mercial relations reduces the exchange of products of the in
tellect; the means of exchange in scientific, artistic and cultural fields are destroyed. A national economy based on the autarchic
23? FOREIGN AFFAIRS
principle produces mental autarchy. As minds grow narrower there is an increase in the estrangement which has unfortunately existed between the great Powers for many years owing to
political factors. Heretofore mankind has progressed only by means of the exchange of intellectual goods; and only by such an
exchange can it resume a healthy development. A considerable school of opinion holds that all that is needed is
to restore the international exchange of goods. Germany's share will thus be increased, and she will again be able to purchase raw materials. These are the people who are always talking of free trade and the lowering of tariff walls. Everybody agrees with
them, but no one has yet succeeded in translating their ideals into reality. The reason for this is very simple. It lies in the fact that a nation's economic strength plays
an extraordinarily
important part in determining its political situation. Today the possession of raw materials has become a political factor,
just as the voluntary change of the currency standard has be come a political instrument. People think that by withholding or
sharing raw materials the political situation of a political oppo nent or friend can be correspondingly influenced. This theory was
sadly exemplified in the famous sanctions agreements of theLeague of Nations. It was imagined that by means of an economic
boycott the political necessities of life could be denied a country, or deliberately limited. We saw the policy in operation against Italy. The Italian example proves that no nation with any claim to honor and worth will willingly submit to such a policy. For
any nation to live at the mercy of another is a
complete impos
sibility. The spirit which prompts the idea is not that of a League of Nations; it is not the spirit of peace. It is a spirit which drives nations apart and into
war. A great nation that sees itself ex
posed to such a danger will employ all its powers to avoid it. No friend of peace can ever approve of measures intended to cut off
great Powers from the natural treasures of the earth. A particularly ridiculous charge to which Germany has often
to listen in connection with her colonial demands is that colonies in general and
her former colonies in particular are valueless, and
that it would not do Germany any good if her colonies were re
turned to her. This immediately prompts the retort: If the col onies are so bad, why do you keep them? It is also misleading to
refer to the minor part played by the colonies in Germany's pre war foreign trade. I have already pointed out that before the
war
GERMANY'S COLONIAL DEMANDS 231
free trade prevailed on a large scale and that Germany had val uable resources in the form of foreign investments. Consequently, it was not necessary before the war for Germany to develop her colonies with particular energy. It nevertheless is astonishing
what Germany did with her colonies before the war without any great effort. They had been in her possession, on the average, for
only some twenty-five years, from the end of the eighties and the
beginning of the nineties. But during those twenty-five years Germany did more with her colonies than other countries had done in two hundred and fifty years.
At the outbreak of the World War, that is, after two decades of German administration, the German colonies had ceased to be a
burden on the mother country. In fact, the financial balance was
so well established that even the colonial railway loans had been
paid for by the earnings of the colonies. Only the seven thousand
police troops were supported by the mother country. During the fifteen years before the war, the external trade of the German colonies had increased seven-fold. That happened in a time when
Germany did not experience a scarcity of raw materials and for
eign currency, in a time when world trade had not been inter
rupted by political and economic mistrust, in a time when the
struggles of different currency systems were not being fought out, in a time, therefore, when Germany had no particular need to
intensify her trade with her colonies. Today, when there no
longer is free trade in the world, when Germany is crushed by for
eign debts and harassed by the lack of raw materials and valuta, if her colonies were returned to her she would proceed to develop them with far greater intensity. A large part of the food supplies and raw materials which we now lack could be furnished by them.
Of course there are short-sighted people who declare that if
Germany got back her colonies they would compete with the other countries v/hich supply raw materials, to the disadvantage of these latter. This is simply the eternally recurring, short
sighted, unbusinesslike attitude of all those people who are
constantly afraid of any new development. It was this attitude which found expression in England in the nineties, when it was said that every Englishman would be the richer if only Germany
were crushed.
Even the stupidest person, I believe, would admit today that the English are not richer by one penny because of the World War and the Versailles Treaty. Their trade has dwindled, like that of
232 FOREIGN AFFAIRS
every other country, and their financial burdens have increased
exactly like those of other nations. If Germany could expand economically by acquiring her
own basis of raw materials, this could only contribute to the stimulation of world trade in general. It would help to increase consumption, promote prosperity, and raise the standard of life, not only of the German people, but of the entire industrial world. At no time in history did the pros
perity of world trade reach such a peak as during the
years of peace before the war, when the economic competition of all countries was vigorous.
For example, trade between Great
Britain and Germany was never so active as at the time before
the war when these two countries were engaged in fair industrial
competition. In matters of foreign politics, the American people, despite
their youth ? or perhaps because of it
? have for the most part shown a healthy, human, moral attitude. It is true that, for reasons which are gradually being seen in their
true light, the American people joined in the
war. But they rightly refused to
ratify the Versailles Treaty, because it was an immoral treaty.
I know very well, and I wish here to confess it openly, that many
things that are happening in Germany today are not approved
of by a large section of the American people. But may I, just as
frankly, ask Americans this question: What would they them selves do, after having lost a war which they fought in the
con
viction that it was for their existence, if they then were oppressed for twenty long years by an unjust peace imposed by the victors, and on top of that were deprived by their opponents of the necessities of life?
The German people have been the torch-bearers of European culture for thousands of years, have been the model in every field of art, have produced the most creative figures in religion and in science. And this is the nation whose moral standing has been affronted and disparaged by its opponents for two decades! It is inconceivable that such treatment should not produce a
profound reaction in the German people. Believe me, my Amer
ican friends, when I say that this German people is still the same
people that gave the world Luther and Goethe. For this reason it
must and will live, for this reason it will continue to fight with all its strength for its place in the world.
Americans must not imagine that they can evade the moral
responsibility laid on their shoulders by President Wilson. That
GERMANY'S COLONIAL DEMANDS
this feeling of responsibility still exists in America is shown by the following statement by Colonel Edward M. House, the same
man from whose Lyons wireless I have already quoted, and who
recently wrote in Liberty as follows: "Every statesman will admit in private conversation that Germany, Italy and Japan need
res ervoirs into which to pour their man power and from which to
draw those necessities and raw materials which nature denied them. But the great possessing nations
? Great Britain, France, the United States and Russia ? are unwilling to grant to their less fortunate fellows more than the crumbs that fall from their colonial table. Just as social peace cannot prevail without some
adjustment of the capitalistic system, so international peace can not be preserved without drastic territorial readjustments. Great
Britain, France, Russia and the United States must receive Italy, Germany, and Japan on terms adjusted to present world condi tions and recognize their insistence upon being given their proper part of the colonial resources of the world. Chaos and catastrophe will be upon us unless those that have among the Powers are will
ing to snare in some way with those that have not." The attitude towards German colonial needs has been modified
a bit. In 1929, when I pointed out at the Young Conference that
Germany's demand for colonies raised an essential condition for her economic survival, I was laughed at. But now a British min
ister, Sir Samual Hoare, speaking before the League of Nations in September of last year, has come forward in favor of a re distribution of the means of access to the world's raw material resources. The precise propositions and intentions that may lie behind that general formulation have not yet been revealed.
I therefore wish to name two conditions essential to the solu
tion of Germany's raw material problem. First, Germany must
produce her raw materials on territory under her
own manage ment. Second, this colonial territory must form part of her own
monetary system. Colonial raw materials cannot be developed without considerable investments. Colonial markets are not of the kind that can live by the personal needs of the native popu lation. Shirts and hats for the negroes and ornaments for their
wives do not constitute an adequate market. Colonial territories are developed by the building of railways and roads, by automo bile traffic, radio and electric power, by huge plantations, etc. From the moment that the German colonies came under the control of the Mandate Powers, Germany was cut off from the
^34 FOREIGN AFFAIRS
delivery of goods required for such investments. In 1913, for
example, Germany's exports to Tanganyika formed 52.6 percent of that area's imports. In 1935 they formed 10.7 percent. The British Mandate Power as a matter of course places its orders in
England and not in Germany or elsewhere. That is the reason why Germany needs colonial territories which she herself administers. Since, however, the development of colonies depends upon long term investments, and these investments cannot be made by the
native negro population, the German currency system must
prevail in the colonial territories, so that the required invest ments may be made with German credits. These, then, are
Germany's two basic demands in the colonial field: that she have territories under German management and included in the Ger
man monetary system.
All the other questions involved ?
sovereignty, army, police, law, the churches, international collaboration
? are open to
discussion. They can all be solved by means of international co
operation so long as nothing unworthy is imputed against the honor of Germany. The German colonial problem is not a
problem of imperialism. It is not a mere problem of prestige. It is
simply and solely a problem of economic existence. Precisely for that reason the future of European peace depends upon it.
